(Sharecast News) - UK energy provider SSE swung to an interim loss on a reported basis in the face of what it called "unprecedented" market volatility as gas storage earnings driven by soaring prices offset weaker earnings from renewables.
The company on Wednesday posted a pre-tax loss of £511m loss compared with a profit of £1.6bn last year. Profitability in renewables was negatively affected by the pace of project delivery and unfavourable weather, exacerbated by the associated requirement to buy back hedges in a higher-price environment.
On an adjusted basis profits more than tripled to £559m. Looking ahead, the company, which is pivoting towards 100% generation of renewable energy, said it still expected adjusted earnings per share for the full year of at least 120p.
SSE also owns wind farms, hydroelectric plants and electricity networks and moved swiftly to head off any criticism about bumper profits while customers face crippling energy bills. It released a separate statement hailing a record investment of £1.7bn during the period, almost four times as much as its net profits and up from £1bn last year.
"By any measure the current operating environment is challenging. However, market conditions that influenced financial performance in the first half of the year have also highlighted the value of our integrated business model, with lower-than-expected renewables output being more than offset by earnings derived from gas storage and thermal assets that have been responding to system demand when needed most," SSE said.
The UK government is tomorrow expected to impose a new windfall tax on the power generation sector in the autumn Budget as it looks to fill a £50bn hole in the public finances caused by the disastrous economic policies of ex-prime minister Liz Truss.
SSE said that adjusted operating profits in its thermal division, which operates six large gas plants, almost tripled to £100.4m from £36.1m. It also owns about 40% of the UK's onshore underground gas storage capacity, which has benefited from high and volatile prices for the commodity.
Adjusted operating profits in the gas storage division surged to £147.8m. SSE said its gas storage had "proven its value to the system providing vital security of supply and flexibility in more volatile market conditions after a number of years of weaker returns".
The renewables business reported a fall in adjusted operating profits to £22.5m from £25.4m. Although its hydroelectric and pumped storage plants captured high prices, this was offset by the hedge buybacks at high prices as SSE's offshore wind farms generated only 63% of planned output because of low wind speeds in late summer.
Reporting by Frank Prenesti for Sharecast.com
SSE (SSE)